Tonkin & Anor v UK Insurance Ltd.

Under a reinstatement insurance policy, the insured must identify clearly whether proposed works reproduce the pre-loss building or include improvements. Improvements must be disclosed and separately costed. The insurer is liable only for the reasonable cost of reinstatement, subject to the policy limit and any properly triggered additional cover.

Reinstatement costs are assessed at the date of the insured loss. A claim for consequential damages arising merely from late payment of the insurance money is generally unavailable, although a distinct breach of contract may be actionable. The insured bears the burden of proving a sufficiently detailed and reliable reinstatement scheme and its cost.

A fire substantially destroyed the claimants’ insured property. The claimants sought reinstatement costs, professional fees, accommodation and related losses under their policy with the defendant insurer.

The principal dispute concerned whether the claimants’ proposed scheme was a proper reinstatement scheme, whether it was adequately documented, the date for assessing reinstatement costs, responsibility for delay, and the effect of alleged fraud and estoppel. The defendant relied on an alternative scheme prepared by its experts.

1. The defendant’s fraud allegations were open for determination despite its earlier admission of liability. The alleged double claim for a kitchen was inadvertent, and the alleged netting-off arrangements were not proved fraudulent. In any event, any fraud concerning approximately £2,000 would not have been substantial enough to taint the whole claim.
2. The claimants could not rely on estoppel concerning the enlarged foundations for the Small Barn. The defendant had approved the ground works on the mistaken basis that they reinstated the former footprint, having been misled by the claimants’ advisers. The wider estoppel argument also failed because there was no relevant representation, reliance or detriment.
3. The September 2003 Delavals scheme was not a reinstatement scheme. It introduced substantial improvements, including a wider Small Barn, altered roof pitches and layout, additional accommodation, a full timber frame, improved floors, roof coverings, windows and services. The scheme was also inadequately documented and incapable of generating reliable tender figures. The burden remained on the claimants to establish a proper scheme.
4. The defendant’s Beale scheme, supported by Athey’s detailed bills of quantities, most closely reinstated the pre-fire layout and condition. The court assessed the basic reinstatement costs by reference to that scheme, adjusted to 2002 prices and reduced for incomplete works and betterment.
5. Under [1979] 2 Lloyd’s LR 91 and [1999] Lloyd’s Rep IR 111, reinstatement loss was assessed at the date of the fire. Following [1999] Lloyd’s Rep IR 111, damages for late payment of damages were unavailable in principle. The claims for increased construction costs, degradation, inconvenience and interest also failed on the facts because the claimants and their advisers caused the critical delays.
6. Judgment was entered for the claimants for £199,262.67 after allowing reinstatement costs, professional fees and limited accommodation-related expenses and deducting prior payments.